I can still vividly remember that first time it happened. It was right after a family dinner for my nephew when my dad leaned over and asked me if he could borrow $20. I was completely dumbfounded.
Without hesitation, I pulled out a crisp $20 bill. But, I did ask why? My dad, after all, was known for unassuming shenanigans.
It turned out that my parents had just paid off a medical bill, but didn’t receive their Social Security check yet. And, he needed the money for gas so that they could get back home.
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Fast forward several years. This became so frequent that my siblings and I had a conference call to figure out what was going on. We finally planned a family dinner to talk to our parents about their financial situation — which wasn’t good.
Obviously, this was difficult. My mom was embarrassed, while my dad got defensive. But, they did finally admit that they were having trouble financially. And, we decided to help them out.
Parental money issues are common.
Believe it or not, this is more common than you may have thought. In 2016, a CNBC survey found that 1 in 5 millennials was providing financial support to their parents — so much for all of those tried stereotypes about this demographic.
Think of the decimation of COVID-19
I have a feeling, though, that in the aftermath of COVID-19 and that 1 in 5 Americans will be age 65 or older by 2040, this could become a serious problem. But, before it does, it probably wouldn’t hurt to have this conversation with your parents. You should also ask yourself the following 7 questions so that you aren’t caught off guard if they need help with money matters.
1. Do you have money to help them financially?
Before making any sort of commitment, make sure that you are actually able to lend a hand financially. After all, it’s not going to help you or them if you’re also struggling to make ends meet. Even worse, this might increase your credit utilization ratio or late payments — both of which can add to your debt and damage your credit score.
But, don’t just assess your current financial situation. For example, you may have it within your budget to help your parents out. However, what if you were saving to start a business or put a down payment on a house?
Don’t put your own finances in jeopardy.
In other words, you also need to take into consideration your future needs. In either case, if you don’t have the funds, then you will have to politely turn down their request.
“Don’t be bullied or guilted into giving more than you’re able,” writes Jen Smith from Modern Frugality. “Prioritize your financial and emotional state, then give your money and time accordingly.”
“And don’t feel pressured to give money directly to your parents,” she adds. “If they need a bill paid or something, then you buy it or pay it. This way, you know where your money is going and that you’re getting the best deal.”
Also, if you do loan them money, set limits. For instance, if they need $200 for groceries, that’s the money you’re going to lend them.
2. Are there other ways that you help?
Regardless if you have the funds or not, there are several ways that you can help your parents with money matters that don’t directly involve cold, hard cash.
For example, when my parents have struggled, my siblings have given them spare gift cards that they don’t plan on using. One such card was to a local convenience store where my parents could top off their gas tank.
Another suggestion would be to sit down with them and make a budget with them. You could also connect them with a financial advisor of local resources like:
- Career counselor and employment agencies
- Welfare agencies and similar services
- Credit and debt counselors
- Lenders who can provide short-term solutions
You could also search for federal and state programs that provide financial assistance for seniors. Various organizations may be able to help them with groceries, utilities, or healthcare and prescription drugs. Head over to the AARP and select the state that your folks reside in to find what’s available for them.
Seniors can also receive a wide range of discounts at restaurants, grocery stores, or travel.
3. Why do they need financial assistance?
Initiating this conversation isn’t for the faint of heart. However, it’s one that you must have with your parents to get to the root cause. For instance, they may occasionally help with an emergency, like their refrigerator broke and don’t have enough money to purchase a new one.
Only help if you can
In situations like the above, providing monetary support seems like the right thing to do — as long as you have it. Another time it makes sense would be if they are ill and cannot work or pay their medical bills. And, if they lost their primary source of income, you could “hire” them — my mom does cooking and childcare for my siblings a couple of days per week.
You shouldn’t lend them money, though, if though are addicted to shopping or gambling. While this may sound cold-hearted, this will only enable them and put financial stress on you. Instead, have them work with professionals, like a therapist specializing in gambling or a credit counselor.
4. Are your partner and/or siblings on board?
In addition to having a sit-down with your parents, you also need to make sure that your significant other is on board. The caveat is if your finances are separate and you’re each allowed to spend your money however you wish. In most cases, though, this isn’t likely, so they need to be comfortable with this so that you aren’t arguing with each other.
Moreover, treat both parents fairly. I’m not suggesting that you play tit-for-tat. But, if you lend your parents money, but refuse to do so for your in-laws, that’s certainly going to cause a rift — which is warranted.
And, if you have siblings, rope them in as well. My family equally contributes a set amount of money each month to a savings account for our parents. It’s a safe way to prevent resentment since we’re all making the same financial commitment.
But what if they can’t help out financially? Find other ways for them to contribute, such as running errands, taking your parents to doctor appointments, or helping out with home repairs.
5. Can you dictate how they spend your money?
Let’s be frank; it’s your money. As such, you do have the right to ask them how it’s being spent.
Let’s say that you gave them $100 to put towards utility bills. You then find out that they took half of that and went to dinner. You should be furious.
One way around this would be to not actually give them money. Instead, you could order their groceries on Intacart or directly pay their electric bill for them. They may grumble, but it ensures that they aren’t recklessly spending your hard-earned money.
6. Will you ask them to pay your back?
In my opinion, that depends. If you can afford to give them a couple of hundred bucks, you may just consider it a gift. After all, they are your parent. Just recall how much they’ve done for you in the past.
But, what if you had to pull some money from your emergency fund? You may ask them to pay you back when they have it. That may sound tough, but it guarantees that you can replenish your savings.
In most cases, though, you might as well consider this money gone — as long as it doesn’t jeopardize your financial health. A better idea would be to help them get their finances in order so that this isn’t a recurring problem.
7. Is it time for you to take over their finances?
Finally, you may have to actually take over your parent’s finances. Usually, this is because they can no longer pay their bills or manage their money. After all, they are ill or incapacitated. Before you this in haste, ask the following ten questions — courtesy of Marlo Sollito at AgingCare:
- Have they named a durable power of attorney to manage their finances?
- Where do they keep their financial records?
- What are their bank account numbers and the names of their financial institutions?
- What are your parent’s monthly expenses?
- How do they pay their bills currently?
- How much is their annual income, and where does it come from?
- Do they receive Medicare, Medicaid, or Social Security?
- What kind of medical health insurance do they have in addition to Medicare?
- Do they have long-term care insurance?
- Do they have an accountant, financial planner, or attorney?
From my personal history, you should also discuss this with your siblings as well. You don’t want to be accused of anything like embezzling or currying favor. If you get the greenlight, also make sure that you document everything to cover your, well, you know what.
